Ethanol can and does increase octane. In Iowa, we have three octane grades: 87 octane regular, 89 octane with 10% ethanol, and 91 to 93 octane premium. I suspect the 89 octane is 87 octane with 10% ethanol.
If you see 87 octane with 10% ethanol, I think it's likely they started with 85 octane gasoline.
Dont worry, the number indicated on the pump is correct.
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